Fin - Breakout - US

Dos Hombres: Bad News on Jobless Claims and a Great Call on Silver

Jeff Macke

Dos Hombres: two guys, two minutes...GO!

Matt Nesto comes out of the gates grousing, albeit with good reason. On what he dubs a "glad to be employed" edition of Dos, he notes that jobless claim numbers came in at an eight-month high at 474k. As much as I enjoy taking the other side, there's really not a joke or good spin to be had with this report. The government may not realistically be able to winnow claims down to a specific number as accurately as the data suggest, but the trend, which is what the "smarts" look at, has turned definitively negative. I don't think you can short the data yet, but if you're long based on the notion of an improving economy, you had best pay heed.

"Sell in May," the oft-mocked trading cliché dating back to the Hoover administration, is looking prudent in 2011; the market is down every day in May thus far. Sticking with his bearish theme of late, Nesto would be looking to take gains where he has them. Specifically, he notes the recent strength in Eli Lilly (LLY) and Boston Scientific (BSX), two long-time laggards bucking this week's sell-off. With both stocks stronger on the week, Nesto would be looking to lock in profits.

After a half-hearted attempt to cheer up my partner, I give props to FOBO (Friend of Breakout) Don Harrold. He dropped into the show from Parts Unknown on Monday and made a brazen call to not just sell but short silver. He took considerable heat for the idea, but he didn't flinch. Viewers can still call him whatever they want, but they can't criticize him for being wrong in this instance; Harrold was interviewed pre-market and put on air midday Monday. Silver is down roughly 20% between now and when his interview aired.

Great call or not, the world is a "what have you done for me lately?" place. That being the case, I asked Harrold what he's doing with his bearish bets now. His response was typically unambiguous. Noting that the Silver ETF (SLV) is down some 30% from highs of just one week ago, he says traders who don't lock in profits on the short side "are smoking weed -- and not the good kind."

Breakout is a meritocracy. Right is right, wrong is wrong and the score is always being kept. Harrold is a day trader and he made a tremendous short-term call for our viewers. 'Nuff said.

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